Sure doing covers are helpful, because everyone already knows what everything should sound like. Makes it easy to find any weak areas that need improving. But no, they are not necessary.

Your rhythm guitarist sounds like he doesn't have the same goals as the rest of you. If it were me I'd be skeptical of it working out and move on, finding another player. It's not to say that he won't come around and if he's a long time buddy, you might want to find out. But barring any special reason for keeping him, I'd be inclined to find players that have similar goals so we can all mesh easily.